[Federal Register Volume 68, Number 189 (Tuesday, September 30, 2003)]
[Rules and Regulations]
[Pages 56449-56466]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 03-24291]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration for Children and Families
45 CFR Part 260
RIN 0970-AC12
Charitable Choice Provisions Applicable to the Temporary
Assistance for Needy Families Program
AGENCY: Administration for Children and Families (ACF), Department of
Health and Human Services (HHS).
ACTION: Final rule.
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SUMMARY: This final rule implements the Charitable Choice statutory
provisions in the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA) as amended. The statutory and
regulatory provisions apply to the Temporary Assistance for Needy
Families (TANF) program administered by ACF. The statute and final rule
establish requirements for State and local governments that administer
or provide TANF services and benefits through contracts or through
certificates, vouchers, or other forms of disbursement. The
requirements and protections also apply to organizations, including
faith-based organizations, that provide services and benefits with TANF
funds and to the beneficiaries of those services.
The TANF Charitable Choice provisions of PRWORA were enacted to
ensure that low-income families receive effective needed services,
including services provided by faith-based organizations. In creating a
Faith-Based and Community Initiative, President Bush has said: ``* * *
when we see social needs in America, my administration will look first
to faith-based programs and community groups, which have proven their
power to save and change lives. We will not fund the religious
activities of any group. But when people of faith provide social
services, we will not discriminate against them.'' To carry out that
commitment and to implement the statute, the final rules clarify the
protections for beneficiaries of services, the rights and obligations
of religious organizations that provide TANF-funded services, and the
requirements and limitations of State and local governments.
EFFECTIVE DATE: October 30, 2003.
FOR FURTHER INFORMATION CONTACT: April Kaplan, Deputy Director, Office
of Family Assistance, ACF, at (202) 401-5138. Deaf or hearing-impaired
individuals may call the Federal Dual Party Relay Service at 1-800-877-
8339 between 8 a.m. and 7 p.m. Eastern time.
SUPPLEMENTARY INFORMATION: On December 17, 2002, ACF published a Notice
of Proposed Rulemaking (NPRM) to implement the ``Charitable Choice''
statutory provisions of section 104 of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 (PRWORA) (Pub. L. 104-193).
67 FR 77362 (2002). We provided a 60-day comment period that ended on
February 18, 2003. We offered the public the opportunity to submit
comments by surface mail, E-mail, or electronically via our Web site.
Comment Overview
After accounting for duplications, we received 38 comments on the
NPRM. We heard from faith-based groups and associations, State welfare
agencies and social services departments, national associations,
advocacy groups, other State-level organizations, and the general
public. Most commenters addressed all aspects of the statutory and
regulatory framework and offered extensive suggestions. Some comments
were generally positive, supportive of specific provisions and
appreciative of our attempt to clarify the statutory requirements. In
general, many commenters had mixed views on both the statutory
provisions and proposed regulatory policies (where we had exercised
regulatory discretion), supporting some provisions and opposing others.
We have summarized the public comments and our response to them
throughout sections I through XIII of the preamble of this final rule.
Table of Contents
I. The Charitable Choice Statutory Framework
II. Regulatory Authority
III. Constitutional Issues--Establishment and Free Exercise Clauses
IV. Equal Treatment for Religious Organizations
V. Restrictions on Inherently Religious Activities by Organizations
that Receive Direct TANF Funding
VI. Religious Character and Independence of Religious Organizations
VII. Employment Practices
VIII. Nondiscrimination Against Beneficiaries
IX. Notice, Referral, and Provision of Services from Alternative
Providers
X. Fiscal Accountability
XI. Effect on State and Local Funds
XII. Treatment of Intermediate Organizations
XIII. Regulatory Analyses
[sbull] Paperwork Reduction Act of 1995
[sbull] Regulatory Flexibility Analysis
[sbull] Regulatory Impact Analysis
[sbull] Unfunded Mandates Reform Act of 1995
[sbull] Congressional Review
[sbull] Assessment of Federal Regulation and Policies on
Families
[sbull] Executive Order 13132
XIV. Final Rule
I. Charitable Choice Statutory Framework
Title I of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA) (Pub. L. 104-193) sets forth
certain ``Charitable Choice'' provisions in section 104, entitled
``Services Provided By Charitable, Religious, or Private
Organizations.'' This section clarifies State authority to administer
and provide TANF services through contracts with charitable, religious,
or private organizations and to provide beneficiaries with
certificates, vouchers, or other forms of disbursement, which are
redeemable with such organizations. The provisions of section 104 are
hereinafter referred to as ``TANF Charitable Choice provisions.'' In
addition to giving States the ability to contract with a range of
service providers and use optimal funding mechanisms, and giving
families a greater choice of TANF-funded providers, section 104 sets
forth certain requirements to ensure that religious organizations are
able to compete on an equal footing for funds under the TANF program,
without impairing the religious character of such organizations or
diminishing the religious freedom of TANF beneficiaries.
President Bush has made it one of his Administration's top
priorities to ensure that Federal programs are fully open to faith-
based and community groups in a manner that is consistent with the
Constitution. It is the Administration's view that faith-based
organizations are an indispensable part of the social services network
of the United States. Faith-based organizations, including places of
worship, non-profit organizations, and neighborhood groups, offer a
myriad of social services to those in need. The TANF Charitable Choice
provisions are consistent with the Administration's belief that there
should be an equal opportunity for all organizations--both faith-based
and non-religious--to participate as partners in Federal programs to
serve Americans in need.
This final rule implements the TANF Charitable Choice provisions
applicable to State and local governments and to religious
organizations in their use of
[[Page 56450]]
Federal TANF and State maintenance-of-effort (MOE) funds. The objective
of this rule is to ensure that the TANF program is open to all eligible
organizations, regardless of their religious affiliation or character,
and to establish clearly the proper uses to which funds may be put and
the conditions for receipt of funding.
This final rule adds Sec. 260.34, ``When do the Charitable Choice
provisions of TANF apply?'' to 45 CFR Part 260, ``General Temporary
Assistance For Needy Families Provisions.'' The introductory language
addresses the applicability of the Charitable Choice provisions to the
TANF program. We have slightly reformatted the flow of the regulatory
provisions. The introductory language is now under Sec. 260.34(a).
Section 260.34(a) also includes the definitions of ``direct'' funding
and ``indirect'' funding, originally proposed as additions to the
definitions in 45 CFR 260.30. We placed the definitions under Sec.
260.34 because these terms are used exclusively in this section and are
not common terms used throughout parts 260-265.
Specifically, the rules provide that Charitable Choice applies
whenever a State or local government:
[sbull] Uses Federal TANF funds or expends State or local funds
claimed to meet the State's MOE requirement to procure services and
benefits from non-governmental organizations; or,
[sbull] Provides clients with certificates, vouchers, or other
forms of disbursement that can be redeemed for services in connection
with the TANF program.
When State or local funds are used to meet the TANF MOE
requirements, the provisions apply irrespective of whether the State or
local funds are commingled with Federal funds, segregated, or expended
in separate State programs. However, pursuant to section 104(k) of
PRWORA as amended (42 U.S.C. 604a(k)), nothing in the Charitable Choice
requirements shall be construed to preempt any provision of a State
constitution or State statute that prohibits or restricts the
expenditure of State funds in or by religious organizations.
Accordingly, States that are subject to such restrictions should
segregate their Federal funds from the funds which are subject to the
provisions of the statute.
The word ``assistance'' is used throughout the Charitable Choice
provisions in section 104 of PRWORA as amended (42 U.S.C. 604a). When
``assistance'' is used in the Charitable Choice statutory provisions,
it broadly refers to all kinds of help, services, and benefits. In
other words, it is broader than the definition of ``assistance'' under
45 CFR 260.31(a) of this part. The Charitable Choice provisions apply
to any and all of the services and benefits available to clients,
through contracts, certificates, vouchers, or other forms of
disbursement of TANF funds. Thus, we have used the term ``benefits''
and ``services'' in the final regulation to refer to the broad range of
activities or help available to clients. We also want to avoid any
misunderstanding that Charitable Choice is solely limited to the
provision of the types of services that constitute ``assistance'' as
defined in 45 CFR 260.31(a).
However, because the Charitable Choice provisions refer only to
State and local governments, Sec. 260.34 does not apply to Tribal
governments operating TANF programs under section 412 of the Social
Security Act.
II. Regulatory Authority
We are issuing this final regulation under the authority granted to
the Secretary of Health and Human Services (the Secretary) by 42 U.S.C.
1302 and 42 U.S.C. 604a. Section 1302 of 42 U.S.C. authorizes the
Secretary to publish regulations that may be necessary to the efficient
administration of the functions for which he is responsible under this
chapter--i.e., 42 U.S.C., chapter 7 (Social Security). Section 604a of
Title 42, chapter 7 of the United States Code sets forth provisions
authorizing States to use faith-based groups, as well as other non-
governmental charities, community groups and private organizations, to
provide benefits and services under the TANF program that help families
achieve self-sufficiency, and includes certain conditions related to
such authority.
As we indicated in the NPRM, section 417 of the Social Security Act
provides that the Federal government may not regulate the conduct of
States under this part or enforce any of the provisions in this part,
except to the extent expressly provided by law. Section 417 applies
only to Federal regulation or enforcement of TANF provisions in Title
IV, part A of the Social Security Act.
Comment: Several commenters questioned our authority to regulate
under the Charitable Choice statutory provisions. Specifically, the
commenters maintained that, while the Charitable Choice provisions are
not part of Title IV-A of the Social Security Act (the TANF program),
the provisions appear in the U.S. Code ``under this part''--i.e., 42
U.S.C., Chapter 7 (Social Security), Subchapter IV (Grants to States
for Aid and Services to Needy Families With Children and for Child-
Welfare Services), Part A (the TANF program), section 604a. The
limitation on our authority to regulate is also in this part of the
U.S. Code, at 42 U.S.C. 617, which provides that ``no officer or
employee of the Federal Government may regulate the conduct of States
under this part or enforce any provision of this part, except to the
extent expressly provided in this part.'' Since section 604a is a
provision ``of this part,'' and there is nothing in 604a that expressly
provides for regulations, the commenters said that we have exceeded our
authority.
Response: We disagree with the commenters' position that we have no
authority to regulate in this area. The limitation on our authority to
regulate was enacted as part of the Social Security Act, Title IV, Part
A, Section 417. The provision limits our authority to issue regulations
implementing any provision in ``this part'' of the Social Security Act
(i.e., Part A, Title IV). Since the Charitable Choice provisions are
not in this, or any, part of the Social Security Act, they are not
subject to the limitation on our authority to regulate.
Codification of both the limitation on our regulatory authority and
the Charitable Choice provisions in the same section of the U.S. Code
(Chapter 7, Part A) does not broaden the restriction on our authority
to regulate. Nor does the codification make the Charitable Choice
provisions a part of the Social Security Act that is subject to section
417. The Charitable Choice provisions remain distinguishable from those
found in Part A, Title IV, of the Social Security Act notwithstanding
the fact that both are codified in the same chapter. As recognized in
The Historical and Statutory Notes accompanying the Charitable Choice
provisions as codified, 42 U.S.C. section 604a, they were ``enacted as
part of the Personal Responsibility and Work Opportunity Reconciliation
Act of 1996 and not as part of the Social Security Act which comprises
this chapter.'' We believe the placement of the Charitable Choice
provisions in the same chapter as section 417 does not change the
meaning of either provision.
In summary, Congress did not intend for the Charitable Choice
provision to be included in the Social Security Act since PRWORA did
not amend the Social Security Act to include Charitable Choice.
Therefore, we conclude that the limitation on Federal authority to
regulate conduct or enforce the Charitable Choice provisions does not
apply.
Because the limitation in section 417 of the Social Security Act
does not apply, the Secretary has used the
[[Page 56451]]
authority granted to him in 42 U.S.C. chapter 7, section 1302, to
publish this regulation, necessary to the efficient administration of
the functions for which he is responsible under chapter 7. The
Charitable Choice provisions have been codified under chapter 7 of the
United States Code at 42 U.S.C.604a.
Comment: One commenter pointed out that section 104 of PRWORA, as
amended, begins as a State option. Therefore, it is not mandatory, as
the NPRM implies.
Response: We recognize that section 104(a) of PRWORA as amended (42
U.S.C. 604a(a)(1)) does provide that a ``State may (A) administer and
provide services * * * through contracts with charitable, religious, or
private organizations; and (B) provide beneficiaries of assistance * *
* with certificates, vouchers, or other forms of disbursement which are
redeemable with such organizations.''
Essentially, this subsection permits a State to choose to conduct
its TANF program by providing funding to help beneficiaries directly
(e.g., through contracts with social service providers) or indirectly
(e.g., with certificates, vouchers, or other forms of disbursement
which are redeemable with charitable, religious, or private
organizations). In other words, the State is not limited to providing
all of the needed services itself, nor must it retain the
administration of any or all of its TANF activities.
If a State does choose to involve any non-governmental providers,
however, then the Charitable Choice provision at section 104(c) of
PRWORA as amended (42 U.S.C. 604a(c)) requires involving religious
organizations on the same basis as any other non-governmental
providers. Therefore, when a State chooses to involve the non-
governmental sector in the provision of benefits and services for or on
behalf of TANF-eligible beneficiaries, then the TANF Charitable Choice
provisions stipulate that a religious service provider may not be
excluded from eligibility for contracts, subcontracts, vouchers, or the
like.
III. Constitutional Issues--Establishment and Free Exercise Clauses
Background
The TANF Charitable Choice statutory provisions were enacted within
the constitutional framework of government interaction with religious
organizations. The goal of Charitable Choice is not to support or
sponsor religion, but to ensure fair competition among providers of
services for low-income families, whether they are public or private,
secular or faith-based. The statute, the proposed rule, and this rule
each requires that contracts with or vouchers redeemable with religious
organizations must comport with the constitutional framework. Patterned
after the statutory language, the proposed rule at Sec. 260.34(a)(1)
(now Sec. 260.34(b)(1)) explicitly provided that: ``Religious
organizations are eligible, on the same basis as any other
organization, to participate in TANF programs as long as their TANF or
MOE-funded services are provided consistent with the Establishment
Clause and the Free Exercise Clause of the First Amendment to the
United States Constitution.''
Comment: Several commenters opined that the proposed rule was an
unconstitutional breach of the principle of separation of church and
State, because it would allow public funds to be given to ``pervasively
sectarian'' organizations, contrary to longstanding judicial precedent.
Response: We do not agree with the commenters. Religious
organizations that receive direct TANF funds for social services cannot
use such funds for inherently religious activities. These organizations
must ensure that religious activities are separate in time or location
from the treatment services and they must also ensure that
participation in such religious activities is voluntary. Furthermore,
they are prohibited from discriminating against a program beneficiary
on the basis of religion, a religious belief, a refusal to hold a
religious belief, or a refusal to actively participate in a religious
practice.
The Supreme Court's ``pervasively sectarian'' doctrine--which held
that there are certain religious institutions in which religion is so
pervasive that no government aid may be provided to them, because their
performance of even ``secular'' tasks will be infused with religious
purpose--no longer enjoys the support of a majority of the Court. Four
Justices expressly abandoned it in Mitchell v. Helms, 530 U.S. 793,
825-829 (2000) (plurality opinion), and Justice O'Connor's opinion in
that case set forth reasoning that is inconsistent with its underlying
premises, see id. at 857-858 (O'Connor, J., concurring in judgment,
joined by Breyer, J.) (requiring proof of ``actual diversion of public
support to religious uses''). Thus, six members of the Court have
rejected the view that aid provided to religious institutions will
invariably advance the institutions' religious purposes, and that view
is the foundation of the ``pervasively sectarian'' doctrine. We
therefore believe that when current precedent is applied to a social
service program, or to the TANF Charitable Choice provisions,
government may fund all service providers, without regard to religion
and free of criteria that require the provider to abandon its religious
expression or character.
Comment: Several commenters asked that the final rule include a
more comprehensive definition and examples of a ``religious
organization'' and a ``faith-based organization.''
Response: Throughout the proposed rule, we used the term
``religious organization'' and the term ``faith-based organization''
interchangeably. Neither the U.S. Constitution nor the relevant Supreme
Court precedents contain a comprehensive definition of religion or a
religious organization that must be applied to this rule. Yet, an
extensive body of judicial precedent provides the practical guidelines
that States and religious organizations need to conform to the
Establishment and the Free Exercise Clauses of the First Amendment to
the U.S. Constitution. Under the TANF Charitable Choice provisions, and
as explained in the section that discusses fiscal accountability, a
religious organization is not restricted to those that are ``non-
profit.'' We have deleted the definition of ``religious organization''
from the final rule.
Comment: Several commenters asked that the final rule provide
additional guidance on how to comply with the Establishment Clause and
that it detail the scope of religious content that must be excluded
from public funding.
Response: In enacting the Charitable Choice provisions, Congress
did not include specific statutory provisions with guidance on how to
meet constitutional requirements. Like Congress, we do not believe it
is appropriate in this rule to provide either States or religious
organizations with detailed guidance on how to comply with the
Establishment or Free Exercise Clauses of the Constitution. States and
faith-based organizations have years of experience and extensive
practice in following case law and adhering to judicial precedent to
conform to these provisions. In enacting PRWORA, Congress sought to
conform the law to this precedent while providing maximum flexibility
to States in carrying out statutory requirements. The requirement in
the proposed rule closely mirrors the statutory provision and we have
retained the identical language of the proposal in the final rule.
[[Page 56452]]
IV. Equal Treatment for Religious Organizations
Background
Under Sec. 260.34(a)(2) of the proposed rule (Sec. 260.34(b)(2)),
we clarified that organizations are eligible to participate in the TANF
program without regard to their religious character or affiliation, and
may not be excluded because they are religious. Federal, State and
local governments administering TANF funds are prohibited from
discriminating against organizations on the basis of religion or their
religious character.
Comment: One commenter suggested that the final rule should also
prohibit discrimination ``in favor of'' faith-based organizations. In
selecting contractors, a government entity should not allow a
provider's religious character to influence its selection.
Response: Like the commenter, we believe congressional intent was
to ensure neutrality and to prohibit any discrimination. Therefore, we
have modified the language of the final rule to read, ``Neither the
Federal government nor a State or local government in its use of
Federal TANF or State MOE funds shall, in the selection of service
providers, discriminate for or against an organization that applies to
provide, or provides TANF services or benefits on the basis of the
organization's religious character or affiliation.''
Comment: A couple of commenters, noting the importance of this
provision, which prohibits Federal, State and local governments
administering TANF funds from discriminating against organizations on
the basis of religion or their religious character, observed that the
proposed rule is consistent with the statute and strongly supported
retention in the final rule.
Response: We agree with these comments and have retained similar
language in the final rule.
Comment: One commenter noted that the provisions under Sec.
260.34(a)(1) and (2) (now Sec. 260.34(b)(1) and (2)) equate religious
and non-religious providers and seek to treat them as equals, thereby
failing to recognize the unique place that religion has in our society.
Religion should be above the fray of government funding, regulation and
auditing, not reduced to it.
Response: This rule does not present any violation of the
Establishment Clause or Free Exercise Clause. Rather, this rule governs
the conscious decision of a religious organization to administer
regulated activities, by accepting public funds to do so. Therefore, we
have retained language that enables faith-based organizations to
compete on an equal footing for funding, within the framework of
constitutional church-State guidelines.
V. Restriction on Inherently Religious Activities by Organizations That
Receive Direct TANF Funding
Background
Section 260.34(c) of this rule describes limitations on the use of
Federal TANF and State MOE funding provided directly to an organization
by a governmental entity or by an intermediate organization that has
the same duties as a governmental entity, as opposed to those funds
that an organization receives indirectly as the result of the genuine
and independent private choice of a beneficiary. The Charitable Choice
provisions allow, at State option, for direct or indirect forms of
funding, or both, to provide benefits and services. Under a ``direct''
funding method, the government or an intermediate organization with the
same duties as a governmental entity purchases the needed services
straight from the provider (e.g., via a contract). Under this scenario,
there are no intervening steps in which the beneficiary's choice comes
into play. The government or intermediate organization selects the
provider which the beneficiary must attend. With an ``indirect''
funding method, by contrast, there is an intervening step in
determining which social service provider receives the Federal TANF or
State MOE funds. Under indirect funding, the individual in need of the
service is given a voucher, coupon, certificate, or other means of free
agency such that he or she has the power to select for himself or
herself from among providers, whereupon the coupon (or other method of
payment) may be ``redeemed'' and the services rendered. Hence, indirect
funding means that individual private choice, rather than the
government, determines which social service provider eventually
receives the funds.
Section 260.34(c) states that Federal TANF and State MOE funds that
are provided directly to a participating organization may not be used
to support inherently religious activities, such as worship, religious
instruction, or proselytization. If an organization engages in such
activities, the activities must be offered separately, in time or
location, from the programs or services for which it receives direct
Federal TANF or State MOE funds, and participation must be voluntary
for the beneficiaries. This requirement ensures that such funds are not
used to support inherently religious activities. Thus, direct Federal
TANF and State MOE funds may not be used, for example, to conduct
prayer meetings, devotional studies of sacred texts, or any other
activity that is inherently religious.
This restriction does not mean that an organization that receives
direct Federal TANF or State MOE funds may not engage in inherently
religious activities. It simply means that such an organization may not
fund these activities with direct Federal TANF funds. Additionally, an
organization may not fund these activities with funds that are used to
meet the MOE requirements, since those funds must be spent consistent
with the Charitable Choice requirements.
For example, suppose a church has a contract with the State's TANF
agency to provide job preparation classes. The classes are held in the
finished basement of the church, the same place where the pastor of the
church holds a Bible study group at the end of the day, when all other
classes have ended. The pastor has extended an open invitation for
anyone who wishes to attend the study group. The church must use
private funds to pay for the Bible study activity. Thus, faith-based
organizations that receive direct Federal TANF or State MOE funds must
take steps to separate, in time or location, their inherently religious
activities from the Federal TANF or State MOE-funded services that they
offer.
In addition, any participation by a program beneficiary in such
religious activities must be voluntary. An invitation to participate in
an organization's religious activities is not in itself inappropriate.
However, directly funded religious organizations must be careful to
inform program beneficiaries that their decision will have no bearing
on the services they receive. In short, any participation by recipients
of services in such religious activities must be voluntary and
understood to be voluntary.
On the other hand, these restrictions on inherently religious
activities do not apply where Federal TANF or State MOE funds are
indirectly provided to religious organizations as a result of a genuine
and independent private choice of a beneficiary. A religious
organization may receive such funds as the result of a beneficiary's
genuine and independent private choice if, for example, a beneficiary
redeems a voucher, coupon, certificate, or similar funding mechanism
that was provided to that individual using Federal TANF or State MOE
funds under a program that is designed to give that individual a choice
among providers. Thus, religious organizations that receive Federal
TANF
[[Page 56453]]
or State MOE funds to provide services as a result of a beneficiary's
genuine and independent private choice need not separate, in time or
location, their inherently religious activities from the Federal TANF
or State MOE funded services they provide, provided they otherwise
satisfy the requirements of the program.
Comment: Some commenters expressed concern that the ``inherently
religious activities'' only need to be offered separately in time or
location from the benefits and services provided with direct Federal
TANF or State MOE funds. They recommended modifying the regulations to
stipulate that if an organization conducts inherently religious
activities, then it must offer them separately in both time and
location.
Response: We decline to accept this recommendation. HHS believes
that this is legally unnecessary and that it would impose an
unnecessarily harsh burden on small religious organizations, which may
have access to only one location that is suitable for the provision of
the service(s). However, this does not preclude an organization that
receives direct Federal TANF or State MOE funds from choosing to set
apart such activities in both time and location.
Comment: One commenter considered the requirement of separating the
inherently religious activities in time or location as insufficient
guidance, and recommended that we define religious content and context
and add these terms to the regulation. Another commenter asked what
constituted an inherently religious activity. The commenter further
stated that the exclusion of all ``inherently religious'' activities
from government funding is flawed, and puts many faith-based
organizations in the position of having to choose either to deny their
core religious perspectives on social issues or to reject government
funds for their programs that accomplish the government's objectives. A
third commenter noted that the phrase ``inherently religious
activities,'' coupled with ``such as'' opens the door to concluding
that activities like providing food for the hungry, or shelter for the
homeless, could be considered an inappropriate use of TANF funds, if
such activities have been undertaken for religiously informed reasons.
Response: We decline to add definitions of religious content and
context into the regulation. We also decline to define ``inherently
religious,'' except through the examples given in the regulation. The
examples are not all-inclusive, as indicated by the introductionary
phrase ``such as.'' The examples include worship, religious
instruction, or proselytization. These are the very examples given in
PRWORA as amended, section 104(j) (42 U.S.C. 604a(j)), in the provision
limiting the use of Federal TANF or State MOE funds provided directly
to institutions or organizations for the delivery of services to TANF-
eligible beneficiaries. (Other basic examples include prayer meetings
and devotional studies of sacred texts.) As some of the commenters
noted, it would be difficult to establish an acceptable list of all
inherently religious activities. Inevitably, the definition would fail
to include some inherently religious activities or include certain
activities that are not inherently religious. Our approach is
consistent with Supreme Court precedent, which likewise has not
comprehensively defined inherently religious activities. The Court has
explained, however, that prayer and worship are inherently religious,
but that social services do not become inherently religious merely
because they are conducted by individuals who are religiously motivated
to undertake them or view the activities as a form of ``ministry.'' We
have added ``Federal'' and ``State'' where applicable, to clarify that
the rule applies to both Federal TANF and State MOE funds.
In using the term ``inherently religious,'' we simply wanted to set
forth a basic framework of understanding as to appropriate and
inappropriate uses of direct Federal TANF or State MOE funds. In other
words, direct Federal TANF and State MOE funds may only be used for the
non-religious services and functions offered by a religious
organization, but not for any part of those services constituting the
group's ``inherently religious'' beliefs or practices. Hence, the
organization's inherently religious functions must be separated--i.e.,
in time or location, as expressed by the regulation. Any inherently
religious activities must be funded entirely by private funds.
Some organizations may be unable or unwilling to structure their
program by separating its inherently religious activities in time or
location, as required. These organizations would not qualify to provide
any of the State's directly funded social service activities, but could
be considered candidates for providing assistance through indirect
funding methods.
This limitation on the use of the direct funds is not meant to put
an organization in the position of having to deny its core religious
perspectives on social issues or reject government funds for its
programs that are consistent with the purposes of the TANF program. We
recognize that while the government regards services like feeding the
hungry and housing the poor as social services or secular work, some
organizations may regard these same activities as acts of mercy,
spiritual service, fulfillment of religious duty, good works, or the
like. Nevertheless, as a general matter, an activity such as providing
food for the hungry or shelter for the homeless would constitute an
appropriate use of funds, as long as any inherently religious
activities offered by the organization are separate, privately funded,
and voluntary.
Comment: One commenter hoped that we would retain the requirement
that organizations offer inherently religious activities separately in
time or location from the social services funded with direct Federal
TANF or State MOE funds. The commenter also agreed that the
beneficiary's participation must be voluntary. Other commenters
expressed concern that Sec. 260.34(b) (now Sec. 260.34(c)) does not
adequately protect participants who do not wish to participate in
inherently religious activities. The commenters suggested that we
strengthen the provision in this subsection so clients may not be
coerced, explicitly or tacitly, to participate in religious activities,
or feel pressured to participate in such activities. These commenters
argued that individuals in need are not always in a condition to make a
thoughtful and well-considered decision whether or not to participate
in worship or similar activities offered by a religious social service
provider, particularly when the individual is in great need of the
service.
Response: We believe that the provision suffices as written.
However, we will use this opportunity to reaffirm that a person's
participation in any religious activities must be entirely voluntary or
noncompulsory. Beneficiaries of directly funded Federal TANF or MOE
social services have the right not to take part in any unwanted
religious practice. Therefore, they may, at any time, refuse to
participate in inherently religious activities. We recommend that
States and organizations help to ensure that clients and prospective
clients have a clear understanding of the services offered by an
organization by having literature available to give to the client which
fully explains the services offered, including any inherently religious
activities, as well as the individual's rights.
Comment: One commenter wrote that the rules should clarify that
individuals who refuse to participate in the inherently religious
activities will not
[[Page 56454]]
be excluded from the program and will not suffer any discrimination in
the administration of the program. Congress specified that Federal
funds may not be used for religious purposes, but the rules provide no
enforcement mechanism, so beneficiaries have no administrative relief
if violations occur.
Response: The TANF Charitable Choice provision at section 104(g) of
PRWORA as amended (42 U.S.C. 604a(g)) explicitly prohibits a religious
organization from discriminating against a participant on the basis of
religion, religious belief, or refusal to participate in a religious
practice. The final rule reiterates this requirement in Sec.
260.34(f). For example, if the service provider is a faith-based
organization (FBO), the FBO may not discriminate against the individual
on account of religion, a religious belief or a refusal to hold a
religious belief. In addition, the FBO may not turn away a beneficiary
from the organization's program solely because the beneficiary refuses
to participate in an inherently religious practice. Hence, this
provision insures the beneficiary's right not to take part in any
unwanted religious practices. The individual's participation in an
inherently religious activity must be entirely voluntary or
noncompulsory. Under the TANF Charitable Choice provisions, government
may not compel an individual, through loss of public benefit or
advantage, to profess a religious belief or to observe an inherently
religious practice. Furthermore, the TANF Charitable Choice provision
at section 104(i) of PRWORA as amended (42 U.S.C. 604a(i)) states ``Any
party which seeks to enforce its right under this section may assert a
civil action for injunctive relief exclusively in an appropriate State
court against the entity or agency that allegedly commits such
violation.'' ``Any party'' includes the beneficiary. We inadvertently
omitted the statutory right to assert a civil action in State court
from the proposed regulation. We have added this provision to the final
regulation at Sec. 260.34(l).
Comment: One commenter wrote that individuals actually providing
government-funded social services should not be involved in
``offering'' an inherently religious activity to program recipients.
Another commenter expressed concern over allowing recipients to
volunteer to participate in religious practices or services, because
this will force administrative complexity on the State. A third
commenter asked whether a participant could volunteer to participate in
a religious activity in lieu of or during the time that TANF-funded
activities are conducted.
Response: If the opportunity to participate in inherently religious
activities is offered at all, then it would be the organization
receiving the Federal TANF or State MOE funds that would offer it.
Thus, while we recognize that staff working for the organization might
offer the TANF beneficiary the opportunity to participate in an
inherently religious activity, we believe that the act of ``offering''
is attributable to the organization and its own staff, not to the TANF
agency. Therefore, we conclude that the ``offer'' does not violate the
Charitable Choice requirement at Sec. 260.43(c) provided participation
is voluntary. The regulation at Sec. 260.34(c) requires that ``If an
organization conducts such (inherently religious) activities, it must
offer them separately * * * and participation must be voluntary for the
beneficiaries of those programs or services.''
In providing the direct funding to pay for social service benefits,
the TANF agency or any other part of the government must neither
support nor sponsor any of the organization's inherently religious
activities. Also, the government may not encourage (or, for that
matter, discourage) the beneficiary to participate in any inherently
religious activities. Hence, we see no reason why a beneficiary's own
choice to participate in an inherently religious activity provided by
an organization should present an administrative complexity to the TANF
agency. Additionally, neutral direct aid to an organization does not
mean, absent evidence to the contrary, that the organization will
divert any part of the Federal TANF or State MOE funds to pay for
inherently religious activities that a beneficiary attends voluntarily.
And, there is nothing in the TANF Charitable Choice provisions that
prevents States from implementing reasonable and prudent procurement
policies to prevent funds from being misapplied to finance such
activities.
Finally, under TANF, States generally have broad discretion in
establishing the objective eligibility criteria that the individual or
family must meet in order to receive particular benefits (whether that
benefit is directly or indirectly funded). We do not prescribe how a
State determines the beneficiary's eligibility or continued eligibility
for the benefits. States may even attach conditions to the
beneficiary's receipt of the TANF or MOE-funded benefit (e.g.,
attendance requirement/absentee limits for participation in a job
training or job skills upgrade class). If the individual does not
satisfy the conditions established for the receipt of the benefit, then
the State could treat the expenditure as an overpayment subject to
recovery.
Comment: One commenter wrote that the definition and distinction
between direct funding and funding an organization receives as a result
of the independent private choice of a beneficiary has significance for
constitutional reasons and should be retained.
Response: We agree, and have retained the distinction applicable to
the funding restrictions on inherently religious activities.
Comment: One commenter asked us to clarify that, where assistance
is ``indirect,'' a faith-based organization may, consistent with the
Establishment Clause, require beneficiaries to participate in its
entire program, including the inherently religious components.
Response: Indirect Federal TANF or State MOE funding methods enable
the individual to choose where he or she wants to receive the needed
services. Therefore, the organization providing the service to the
beneficiary may invite (not require) the beneficiary to participate in
inherently religious activities as part of its entire program. This is
because the statute at section 104(g) of PRWORA (42 U.S.C.604a(g))
prohibits an organization from discriminating against an individual in
rendering assistance on the basis of religion, a religious belief, a
refusal to hold a religious belief, or refusal to actively participate
in a religious practice. So, the individual has the right to refuse to
participate in the religious practice and may not be deprived of the
offered social services. Or, if the individual wants to receive the
service from an alternative provider because he or she objects to the
religious character of the organization or institution, then the State
must use an alternative provider to furnish the service.
The TANF Charitable Choice prohibition at section 104(j) of PRWORA
as amended (42 U.S.C. 604a(j)) speaks to funds ``provided directly to
institutions or organizations.'' It does not include ``indirect
funding.'' As a result, organizations that receive funds indirectly
(e.g., by means of vouchers or certificates) do not have to separate,
in time or location, their inherently religious activities from the
Federal TANF or State MOE funded services they furnish--provided they
otherwise satisfy the requirements of the program.
However, the alternative provider requirement at section 104(e) of
PRWORA as amended (42 U.S.C.
[[Page 56455]]
604a(e)) does not differentiate between direct and indirect funding of
services. Therefore, we conclude that the alternative provider
requirement applies whether Federal TANF or State MOE funds are
provided directly or indirectly to the institution or organization. The
beneficiary has a right to an alternative provider, regardless of
funding method.
We recommend that States and organizations help to ensure that
clients and prospective clients have a clear understanding of the
services offered by an organization by having literature available to
give to clients which fully explains the services offered, including
any inherently religious activities, as well as expectations and
requirements.
Comment: One commenter asked us to clarify the definition of
indirect funding and its application to service providers and to
provide examples.
Response: Essentially, indirect funding places the choice of
service provider in the hands of the beneficiary. Then, the State pays
for the cost of that service through a voucher, certificate, or other
means of free agency. In this way, the government is providing
assistance to beneficiaries by dealing ``indirectly'' with independent
providers and directly with beneficiaries. For example, the TANF
agency, operating under a neutral program of aid, could present the
beneficiary with a list of all qualified providers at which the
beneficiary could obtain services using a government-provided
certificate. Or, the State could choose to allow the beneficiary to
secure the needed service on his/her own. Either way, the State
empowers the beneficiary to choose for himself or herself to receive
the needed services through a religious organization or through some
other provider. The State could pay for the individual's choice of
provider by giving the individual a voucher or other business form that
tells the provider that the TANF agency will pay for the service. Or,
the State could choose to pay the provider directly after asking the
beneficiary to indicate his/her choice. We have added the above
definition in Sec. 260.34(a) of the final regulation.
Comment: Several commenters wrote that the voucher program
authorized by the proposed rule lacks adequate constitutional
safeguards, including legitimate secular options and secular purpose.
Another commenter wrote that the proposed rule did not mention the
provision of secular alternatives in cases where the voucher provider
is religious. Without reasonable secular alternatives, beneficiaries
may be forced to use religious providers. Yet another commenter
expressed concern that the ability of individuals to use government-
sponsored vouchers for religiously based services erodes the
traditional American value of separation of church and State. The
commenter thinks that State and local governments will be subject to
numerous lawsuits challenging the legality of the use of government
funds for religiously-based programs.
Response: The TANF Charitable Choice provision at section
104(a)(1)(B) (42 U.S.C. 604a(a)(1)(B)) authorizes the use of
``certificates, vouchers, or other forms of disbursement,'' as a State
option. But, neither the statute, the NPRM, nor the final rule,
``require'' a voucher program. Although States must have a policy of
inclusion as discussed below, they also have the flexibility to decide
the best methods of delivering the services to or on behalf of their
clientele. States are obligated to ensure that they provide options in
a manner consistent with the Establishment Clause of the First
Amendment and may review any relevant precedents concerning vouchers to
do so.
We do not agree with the contentions that vouchers for religiously
based services erode the value of separation of church and State, force
individuals to attend ``pervasively sectarian'' institutions, or lack
secular purpose for the following reasons. First, the Supreme Court has
consistently upheld the constitutionality of mechanisms of indirect
aid, such as vouchers, distributed without regard to religion.
Therefore, we think that it is reasonable to conclude that neutral,
indirect aid to a religious organization does not violate the
Establishment Clause.
Second, the goal is secular, namely, to fund social services that
help TANF-eligible individuals and families attain and maintain self-
sufficiency. The Charitable Choice provisions level the playing field
for qualified providers of these services who are faith-based, by
giving them the right to participate in the provision of those
services. The TANF Charitable Choice provisions simply stipulate that a
religious service provider may not be excluded from eligibility for
contracts, subcontracts, vouchers, or the like, on the grounds that the
provider is religious, too religious, or ``pervasively sectarian.''
This does not mean that the object of Charitable Choice is to support
or sponsor religion or participating religious providers.
Furthermore, the TANF Charitable Choice provisions do not guarantee
that Federal TANF or State MOE funds must automatically flow to
religious providers. Whether funding is direct or indirect, the
Charitable Choice provisions simply guarantee that religious providers
will not be discriminated against in the procurement process, by
requiring government to stop ``picking and choosing'' among groups on
the basis of religion.
Finally, Sec. 260.34 (g) states that if the applicant or recipient
objects to the religious character of a TANF service provider, he or
she is entitled to an alternative provider to which the individual has
no religious objection. This is in keeping with the TANF Charitable
Choice provision at section 104(e)(1) (42 U.S.C. 604a(e)(1)), which
requires that the State provide the individual with assistance from
``an alternative provider.'' Hence, the alternative provider could, but
does not have to be secular.
Comment: One commenter contends that there are numerous unresolved
issues concerning the funding for the vouchers. For example, how would
local governments measure ``comparable services'' between secular and
religious-based programs if the individual used the TANF voucher in a
``pervasively sectarian'' program? Or, if the beneficiary redeems a
voucher and dissents from the program because of its religious tone, is
that voucher transferable? This commenter also asked whether a local
government may object to the individual's ``genuine and independent
private choice'' with regard to the program. Would such an act by the
local government subject it to the loss of Federal funding?
Response: States may establish their own policies and procedures
for establishing eligibility or continued eligibility for a particular
social service benefit, as well as the method of delivery, management,
and disposition of the benefit. In keeping with the flexibility
afforded to States, States may determine for themselves how best to
define which services are comparable to those that the TANF agency has
determined an individual is eligible to receive.
We are confident that States are well-versed in collaborating with
local jurisdictions, other State agencies, and appropriate social
service providers, and therefore we do not anticipate problems with the
quality of a person's free and independent choice under an indirect aid
scenario.
Comment: One commenter wrote that the indirect-funding definition
opens the door to government-funded worship and proselytization. This
commenter asked us to require that all government-funded services are
free of religious content. In addition, the commenter thinks that
``free and independent choice'' is a myth which incorrectly
[[Page 56456]]
assumes that people in need will be able to shop for services. Social
services are not available on a scale that makes ``choice'' real.
People use the most geographically accessible providers.
Response: We find no basis to require that indirectly funded
services be free of religious content. Furthermore, we disagree that
funding services indirectly opens the door to government-funded worship
and proselytization. The Supreme Court has consistently held that
governments may fund programs that place the benefit in the hands of
individuals, who in turn have the freedom to choose the provider to
which they take their benefit and ``spend'' it, whether that
institution is public or private, nonreligious or religious. Therefore,
any consequential aid to religion having its origin in such a program
is the result of the beneficiary's own choice. In other words, indirect
funding means that individual private choice, rather than the
government, determines which social service provider eventually
receives the funds. As a general matter, this removes involvement on
the part of the government in worship and proselytization. We believe
that this thinking played a part in Congress limiting the prohibition
in section 104(j) of PRWORA as amended (42 U.S.C. 604a(j)), on the use
of Federal TANF or State MOE funds for worship, religious instruction,
or proselytization, to the direct funding of benefits and services.
One of the aims of Charitable Choice is that faith-based and
community-based organizations will be able to expand their capacity to
provide for the social service needs of under-served areas. Also, in
soliciting competition for possible Federal TANF or State MOE funds, a
State could, for example, include among the factors that it will weigh
toward choosing a provider, the ability of a potential provider to
provide beneficiaries with transportation to and from the point of
service.
Additionally, even when a State operates within the required level
playing field, there may still be occasions where no faith-based
organizations successfully compete to provide the needed service,
regardless of whether the State has chosen to pay for the service
directly or indirectly. We expect and understand this. As we previously
mentioned, Charitable Choice is not a guarantee that Federal TANF or
State MOE funds must automatically flow to faith-based organizations.
The TANF Charitable Choice provisions do not require that States favor
religious organizations. The provisions simply require a level playing
field in the procurement of benefits and services.
Also, the TANF Charitable Choice provisions leave it up to States
to decide whether to involve the non-governmental social service sector
or to provide all services through government agencies. In some areas,
the latter may be the State's only choice, until non-governmental
providers expand their service capabilities. But, if a State does
choose to involve any non-governmental providers, then the Charitable
Choice provision at section 104(c) of PRWORA as amended (42 U.S.C.
604a(c)) requires involving religious organizations on the same basis
as any other non-governmental providers.
In addition, indirectly funded organizations must of course satisfy
secular requirements of the program and provide otherwise eligible
services through their programs.
VI. Religious Character and Independence of Religious Organizations
Background
Section 260.34(d) of the final rule clarifies that a religious
organization that participates in the TANF program retains its
independence from Federal, State, and local governments, provided that
it does not use direct Federal TANF or MOE funds to support inherently
religious activities. It may continue to carry out its mission,
including the definition, practice and expression of its religious
beliefs. Among other things, religious organizations may use their
facilities to provide TANF-funded services, without removing religious
art, icons, scriptures, or other symbols. In addition, a religious
organization that receives Federal TANF or State MOE funds may retain
religious terms in its organization's name, select its board members on
a religious basis, and include religious references in its
organization's mission statements and other governing documents.
Comment: A number of commenters expressed concern that a religious
organization in receipt of Federal TANF or State MOE funds does not
have to remove the religious art, icons, scriptures, or other symbols.
The commenters think that this provision is too broad. It could result
in the organization providing services in a setting that may well
constitute a ``pervasively sectarian'' atmosphere in which members of a
different religion may not feel comfortable or welcome to receive their
TANF-funded benefits. For example, the organization could conduct the
government-funded program in a chapel, leading to a reasonable
misperception of government endorsement of or support for religion.
Response: Section 104(d) of PRWORA as amended (42 U.S.C. 604a(d))
imposes on the government a duty not to intrude into the institutional
autonomy of religious organizations. Each participating faith-based
organization in receipt of Federal TANF or State MOE funds, whether
directly or indirectly, shall retain its independence from Federal,
State and local governments. This independence includes their control
over the definition, development, practice, and expression of its
religious beliefs. In addition, the statute expressly prohibits State,
Federal, and local governments from requiring a religious organization
to alter its form of internal governance or to remove religious art,
icons, scripture, or other symbols in order to be eligible to receive
directly or indirectly funded Federal TANF or State MOE funds to
provide help to beneficiaries. If the beneficiary objects to the
religious character, then he or she is entitled to receive the social
service benefit at an alternate provider to which the beneficiary has
no religious objection. In addition, as noted above, the Supreme
Court's ``pervasively sectarian'' doctrine no longer enjoys the support
of a majority of the Court. See Mitchell v. Helms, 530 U.S. 793, 825-
829 (2000) (plurality opinion), id. At 857.858 (O'Connor, J.,)
(requiring proof of ``actual diversion of public support to religious
uses'').
Comment: Several commenters noted that the protections afforded in
this subsection are consistent with the statute and should be
maintained. One of the commenters requested that we add a statement
essentially stating that ``contrary State and local procurement laws
that would otherwise prohibit faith-based organizations (FBOs) from
continuing to staff on a religious basis'' are preempted. Another
commenter asked that we add language essentially stating that nothing
in this section shall be construed to affect any State or local law or
regulation that relates to discrimination in employment, including the
provision of employee benefits.
Response: The protections in Sec. 260.34(d) have been retained. We
believe that the content of this subsection suffices as written.
As discussed under ``Employment Practices,'' the FBOs enjoy an
exemption ``with respect to the employment of individuals of a
particular religion,'' under Title VII of the Federal Civil Rights Act
of 1964. Therefore, in keeping with the guarantees of institutional
autonomy, a
[[Page 56457]]
religious organization may continue to select its own staff in a manner
that takes into account its faith, without violating Title VII.
The Charitable Choice provision at section 104(f) of PRWORA as
amended (42 U.S.C. 604a(f)) expressly guarantees that a religious
organization's Title VII exemption shall not be affected by its
participation in or receipt of TANF funds, whether the State or local
government directly or indirectly uses Federal TANF funds or expends
State or local funds claimed to meet the State's MOE requirement to pay
for the services.
Comment: One commenter believes that all organizations receiving
government funds to provide social services must be subject to
consistent levels of government oversight so that standards and
regulations pertaining to safety, performance, non-proselytization,
quality of care, and financial management are followed.
Response: States are subject to an audit of their TANF programs in
accordance with Office of Management and Budget (OMB) Circular A-133
(Audits of States, Local Governments, and Non-Profit Organizations).
The audit examines use of Federal TANF and State MOE funds in
accordance with applicable cost accounting and financial principles, as
well as programmatic principles. The State is responsible for the
appropriate use of its Federal TANF and State MOE funds. Therefore, any
organization that receives Federal TANF or State MOE funds needs to be
able to show to the State and the auditor that it used the funds,
whether provided directly or indirectly, for the purpose intended by
the State. These requirements are also addressed in our response to
comments in Section X below, ``Fiscal Accountability.''
This is in keeping with the TANF Charitable Choice provision at
section 104(h) of PRWORA as amended (42 U.S.C. 604a(h)) and this
regulation in Sec. 260.34(h), in which we stipulate that religious
organizations receiving Federal TANF or State MOE funds will be subject
to audit, just like any other non-governmental organization receiving
such funds. Thus, all organizations receiving government funds to
provide social services are subject to consistent levels of government
oversight.
VII. Employment Practices
Background
In language similar to that in the statute, the proposed rule at
Sec. 260.34(d) (now Sec. 260.34(e)) specified that the receipt of
TANF or MOE funds does not affect a participating religious
organization's exemption provided under 42 U.S.C. 2000-e regarding
employment practices. Title VII of the Federal Civil Rights Act of 1964
permits a religious organization to hire employees who share its
religious beliefs. This helps enable faith-based groups to promote
common values, a unity of purpose, and shared service--thus protecting
the religious liberty of communities of faith.
Comment: Several commenters agreed that the proposed rule reflects
a proper understanding of civil rights law. When a faith-based
organization receives government funding and hires staff on a religious
basis, the law is not violated.
Response: We agree with these commenters and have retained the
identical language in the final rule. This statutory and regulatory
provision of Charitable Choice does not change the status quo; it
simply clarifies the applicability of the exemption to the TANF
program.
Comment: Several commenters believed that the proposed rule allows
employment discrimination in violation of constitutional prohibitions
and court decisions that have struck down government-funded
discrimination. One commenter explicitly stated that this provision
runs afoul of the ``no-religious-tests clause'' of the Constitution
under which ``no religious test shall ever be required as a
qualification to any office or public trust under the United States.''
Response: We do not agree with these commenters. The Equal
Employment Opportunity Act of 1972 broadened Title VII of the Civil
Rights Act of 1964 to free religious organizations from charges of
religious discrimination, regardless of the nature of the job. In 1987,
the Supreme Court addressed and unanimously upheld the
constitutionality of the 1972 amendment or exemption for religious
organizations. In addition, it is well settled that the receipt of
government funds does not convert the employment decisions of private
institutions into ``state action'' that is subject to constitutional
restrictions such as the ``no religious test'' clause of the
Constitution.
Comment: A number of commenters stated that the exemption from
Title VII of the Civil Rights Act was never intended to permit a
religious organization to favor co-religionists in hiring when using
Federal funds to pay the salaries and wages of employees who are
carrying out governmentally-funded social service programs.
Response: We do not agree that these comments accurately portray
the law. Title VII of the Civil Rights Act, which applies to
organizations regardless of whether they receive Federal funds,
contains an explicit exemption for religious organizations, which
allows them to hire, promote, and fire staff on a basis that takes into
consideration the organization's religious beliefs and practices
without violating Title VII. That exemption is not lost when a faith-
based organization receives Federal TANF funds or State MOE funds to
provide a secular service. Also, we would note that section 702(a) of
the Civil Rights Act of 1964 is permissive. It allows religious
staffing, but does not require it. And, religious organizations are
subject to Federal civil rights laws that prohibit employment
discrimination on the basis of race, color, national origin, sex, age,
and disability.
Comment: Several commenters noted that State and local governments
have contracting laws that prohibit employment discrimination, beyond
the Civil Rights Act of 1964. These commenters asked that the final
rule clarify that nothing in the rule is intended to modify or affect
any State law or regulation that relates to discrimination in
employment.
Response: The Charitable Choice provision at section 104(f) of
PRWORA as amended (42 U.S.C. 604a(f)) expressly guarantees that a
religious organization's Title VII exemption shall not be affected by
its participation in or receipt of TANF funds. Hence, Charitable Choice
applies whenever a State or local government uses Federal TANF funds or
expends State or local funds claimed to meet the State's MOE
requirement to procure services and benefits from non-governmental
organizations, or provides clients with certificates, vouchers, or
other forms of disbursement that can be redeemed for services in
connection with the TANF program. When State or local funds are used to
meet the State's MOE requirement, the provisions apply irrespective of
whether the State or local funds are commingled with Federal funds,
segregated, or expended in separate State programs.
The only exception is found in section 104(k) of PRWORA as amended
(42 U.S.C.604a(k)), which clarifies that the Charitable Choice
requirements do not preempt any provision of a State constitution or
State statute that prohibits or restricts the expenditure of State
funds in or by religious organizations. We do not believe that this
``preemption'' provision can be interpreted to cover State or local
employment discrimination laws. (For a more detailed analysis of the
[[Page 56458]]
implications of Charitable Choice on State and local laws, see the
analysis provided under the heading ``Effect on State and Local
Funds''.)
VIII. Nondiscrimination Against Beneficiaries
Background
This provision applies to individuals who receive Federal TANF or
State MOE-funded services. In Sec. 260.34(f) of the final rule, we
state that religious organizations are prohibited from discriminating
against beneficiaries or potential beneficiaries on the basis of
religion, a religious belief, refusal to hold a religious belief, or a
refusal to actively participate in a religious practice. Accordingly,
religious organizations, in providing services funded in whole or in
part by Federal TANF or State MOE funds, may not discriminate against
current or prospective program beneficiaries on the basis of religion,
a religious belief, a refusal to hold a religious belief, or a refusal
to actively participate in a religious practice.
Comment: Many of the commenters expressed concern over the use of
the word ``active'' in setting forth the prohibition from
discriminating against beneficiaries or potential beneficiaries on the
basis of religion, a religious belief, a refusal to hold a religious
belief, or a refusal to actively participate in a religious practice.
They interpreted the word ``active'' to allow the delivery of religious
messages using facilities and equipment funded by the government, and
they believed that this word opens the door wherein vulnerable clients
may be exposed to inappropriate ``passive'' religious practices. The
commenters recommended removing the word ``actively'' from the final
regulations.
Response: We disagree. In section 104(g) of PRWORA as amended (42
U.S.C. 604a(g)), Congress prohibited religious grantees from
discriminating against program beneficiaries on three related grounds:
``religion, a religious belief, or refusal to actively participate in a
religious practice.'' In addition, section 104(b) of PRWORA as amended
(42 U.S.C. 604a(b)) stipulates that the religious freedom of
beneficiaries may not be diminished, and section 104(e)(1) of PRWORA as
amended (42 U.S.C. 604a(e)(1) provides that beneficiaries who object to
the religious character of a service provider have a right to an
alternative provider. These provisions are straightforward and are
sufficient to protect the religious freedom of program beneficiaries.
Accordingly, we have retained the language of the proposed rule, which
is based on Congress's own language.
Comment: One commenter stated that it is unclear whether the
discrimination prohibition applies to funds provided both directly and
indirectly to the religious organization. The commenter also asked us
to prohibit providers from inquiring about the religious affiliation of
applicants, and to require a notice advising that any religious
services offered to the beneficiary are voluntary.
Response: The prohibition in section 104(g) of PRWORA as amended
(42 U.S.C. 604a(g)) makes no distinction in funding source or funding
method. Therefore, religious organizations, in providing services
funded directly or indirectly, in whole or in part, with Federal TANF
or State MOE funds, may not discriminate against current or prospective
beneficiaries on the basis of religion, a religious belief, a refusal
to hold a religious belief, or a refusal to actively participate in a
religious practice. As we mentioned in the discussion regarding
``Restrictions on Religious Activities By Organizations that Receive
Direct TANF Funding,'' when Federal TANF or State MOE funds are
disbursed indirectly to the organization providing the service, then
the organization may invite (not require) the beneficiary's
participation in inherently religious activities. But, if the
individual objects to the religious character of the organization or
institution, then he or she has a right to receive the services from an
alternative provider. This allows the beneficiary to avoid unwanted
religious practices and prevents the individual's religious freedom
from being diminished.
We decline to add a statement prohibiting providers from inquiring
about the religious affiliation of applicants. We believe that the
provision as written, is adequate.
We also decline to require that religious organizations provide a
notice to a beneficiary or potential beneficiary assuring that
participation in religious activities would be entirely on a voluntary
basis. We recommend that States and participating organizations work
together to ensure that clients and potential clients have a clear
understanding of the services offered by the organization, including
any religious activities, as well as the organization's expectations
and requirements. The requirement that participation be voluntary,
however, is sufficient to address concerns about the religious freedom
of program beneficiaries.
Comment: One commenter wrote that the proposed rule does not
require a secular alternative. Therefore, it lacks constitutionally-
required safeguards for beneficiaries.
Response: The proposed rule at Sec. 260.34(f) (now Sec.
260.34(g)(2)) provided that if the applicant or recipient objects to
the religious character of a TANF service provider, he or she is
entitled to an alternative provider to which the individual has no
religious objection. This is in keeping with the TANF Charitable Choice
provision at section 104(e)(1) (42 U.S.C. 604a(e)(1)), which requires
that the State provide the individual with assistance from ``an
alternative provider.'' Hence, the alternative provider could, but does
not have to be, a secular alternative; it need only be a provider to
which the beneficiary has no religious objection. We have retained the
wording of this provision.
Comment: One commenter asked us to clarify that a beneficiary has
the right to choose indirect government funding to enroll in a program
that has a religious component. The commenter also asked us to add that
``nothing in this section shall be construed to prohibit a program
beneficiary from using indirect government assistance to receive
services from a participant whose program has a required religious
component or to prohibit such participant from offering the required
religious component.''
Response: We decline to add the suggested sentence to the final
rule. The welfare reform law of 1996 (PRWORA) gave States unprecedented
flexibility to design and conduct their own TANF programs. In addition,
the TANF Charitable Choice provision at section 104(a)(1) (42 U.S.C.
604a(a)(1)) gave States the option to administer and provide services
directly and/or indirectly. Further, each State is responsible for its
own decisions regarding how to use its Federal TANF and State MOE
funds, including the range of services it elects to provide and the
method of paying for those services. But, this does not preclude a
beneficiary from personally choosing to participate in any inherently
religious activities that an organization offers, even if the social
service benefit provided to him or her is directly funded by the TANF
agency. It just means that, for directly funded social services, the
inherently religious activities must take place separately, in time or
location, from the provision of the Federal or State MOE funded social
service benefit.
Comment: One commenter would like us to recognize that religious
organizations and secular organizations sometimes discriminate on the
basis of sexual orientation or gender identity. The commenter suggested
that we
[[Page 56459]]
develop a regulation banning religious, sexual orientation and/or
gender identity discrimination with Federal or other public funds.
Response: Religious organizations and secular organizations alike
must follow Federal civil rights laws prohibiting discrimination on the
bases of race, color, national origin, gender, age, and disability.
However, the Federal civil rights laws are silent on discrimination on
the basis of sexual orientation and/or gender identity, and we decline
to impose such restrictions by regulation.
Comment: Several commenters noted that if religious organizations
are providing program services and facilities, then they must be in
compliance with the Americans with Disabilities Act (ADA). Persons with
disabilities should not be assigned to alternative or substitute
programs or services.
Response: Although it is beyond the scope of these regulations to
address how various civil rights laws might apply in all situations,
organizations providing services must comply with Federal civil rights
laws to the extent that those laws are applicable. In particular, we
note that Title III (Public Accommodations and Services Operated by
Private Entities), section 307 of the Americans with Disabilities Act
of 1990 excludes religious organizations or entities controlled by
religious organizations, including places of worship, from the
provisions. Yet, religious institutions are subject to several
requirements designed to ensure services to persons with handicaps in
section 504 of the Rehabilitation Act of 1973, and its implementing
regulations at 45 CFR part 84, which prohibit discrimination on the
basis of disability in programs or activities receiving Federal
financial assistance.
IX. Notice, Referral, and Provision of Services From Alternative
Providers
Background
Section 260.34(f) of the proposed rule (now Sec. 260.34(g))
received more comments than any other provision. In this section, we
stated that individuals applying for or receiving Federal TANF or MOE-
funded services may object to the religious character of a religious
provider. If so, they are entitled to receive services from an
alternative provider. The State or local agency must refer the
individual to an alternative provider of services within a State-
defined, reasonable period of time. Alternative providers must be
reasonably accessible and be able to provide comparable services, which
are at least equal in value to those the individual would have received
from the initial provider. The alternative provider does not have to be
a secular organization, just one to which the program beneficiary has
no religious objection. Since effective services need to take into
consideration local conditions, we deferred to States on how to
accomplish these statutory and regulatory objectives.
However, the proposed rule did clarify that State and local
governments are responsible to ensure that clients are provided notice
of their rights to alternative providers, and are referred to and
provided alternative services within a reasonable period of time, if
they object to a religious provider. And, while the responsibility for
the notice, referral and provision of the alternative service rests
with the State or local agency, each participating organization has a
responsibility to help clients know and understand their rights. We
also encouraged all involved organizations to develop and implement
reasonable tracking procedures to ensure that clients do not ``fall
through the cracks'' and lose timely services.
Comment: Several commenters noted that the requirement to provide
alternative services places additional burdens on State agencies,
especially in rural areas. A faith-based organization may be selected
as the service provider for a particular geographic area. Ensuring that
an alternative service provider is available could require the State to
make dual sets of services available, and thus increase costs. As a
result, many of these commenters suggested that the requirement to
provide alternative services is unreasonable. Some suggested that
exceptions be permitted or that the requirement should be eliminated.
Others noted that with this requirement, some States may choose not to
contract out or provide community-based services, especially in rural
areas.
Response: In enacting the Charitable Choice provision, Congress had
to carefully balance the rights of individuals with the duty of
government to not discriminate with respect to religion when selecting
non-governmental providers of social services. To accomplish these two
principles, the statute imposes the requirement to provide accessible
and comparable assistance or services within a reasonable period of
time to an individual who has an objection to the religious character
of an organization. In the proposed rule, with the exception of
requiring notice and referral, we did not expand or enhance the rights
of beneficiaries to assistance from an alternative provider, but simply
clarified this statutory entitlement. We also left substantial
discretion to States to define terms and carry out the statutory
objective.
We also believe that commenters may have overestimated the impact
and potential burden of this requirement. Many faith-based
organizations have a long history of contracting with State and local
governments to address the secular purpose of providing assistance and
services to needy families. Few beneficiaries have objected to the
religious nature of these providers, which is perhaps unsurprising in
light of the fact that any inherently religious activities must be
offered separately and on a voluntary basis. We also do not believe
States will decide not to contract out or provide community-based
services in order to avoid this requirement. Since the statutory
Charitable Choice requirements have applied since 1996, we believe that
State and local governments are providing alternative services, in
compliance with the law, and discovering and enhancing procedures that
efficiently and effectively address this requirement.
It is also worth noting that one of the aims of Charitable Choice
is that faith-based and community-based organizations will be able to
expand their capacity to provide for the social service needs of under-
served areas. Also, in soliciting competition for possible Federal TANF
or State MOE funds, a State could, for example, include among the
factors that it will weigh toward choosing a provider, the ability of
potential providers to provide beneficiaries with transportation to and
from the point of service.
Finally, the TANF Charitable Choice provisions leave it up to
States to decide whether to involve the non-governmental social service
sector or to provide all services through government agencies. In some
areas, the latter may be the State's only choice, until non-
governmental providers expand their service capabilities. But, if a
State does choose to involve any non-governmental providers, then the
Charitable Choice provision at section 104(c) of PRWORA as amended (42
U.S.C. 604a(c)) requires involving religious organizations on the same
basis as any other non-governmental provider.
Comment: Several commenters believed that the proposed rule left
too much discretion to States to define the terms ``reasonably
accessible,'' ``a reasonable period of time,'' ``comparable,''
``capacity,'' and ``value that is not less than.'' These commenters
asked that we either provide Federal definitions for these terms, or
establish
[[Page 56460]]
baseline parameters or guidelines. Others appreciated the discretion we
had provided to States, but were concerned that the expectation of
alternative services may expose States to litigation based on
availability and how they define comparable services.
Response: Since the enactment of the welfare reform legislation in
PRWORA, we have learned two clear lessons:
[sbull] Operational details and procedures need to be developed
taking into consideration community and local needs and constraints.
Because State and local governments have the knowledge of these
realities, they are better prepared to define and set realistic and
effective parameters to meet these mandatory, statutory goals. Given
the diverse and wide range of TANF services, benefits and programs
offered by States, it would be nearly impossible for us to define these
terms in ways that would accommodate the needs of different States and
communities; and,
[sbull] When given the flexibility, opportunity and authority
through devolution, States and communities have demonstrated tremendous
creativity leading to beneficial results. When TANF was enacted, many
people expressed concern that the flexibility granted States, without
Federal regulation would lead to ``a race to the bottom.'' Experience
has proven these fears to be completely unfounded; and, if anything,
the converse is true. Through experimentation and innovation, States
and communities have developed programs and services to enhance the
ability of families to achieve independence--a true race to the top and
to excellence.
We believe that States, faced with the challenge of how to offer
clients this option, while at the same time guaranteeing other
alternative providers, will again rise to the occasion and develop
reasonable and effective definitions and operational procedures. We are
convinced that families will be better served by providing this
discretion to States.
Nevertheless, we do believe that States must conscientiously apply
guidance to assure fair treatment and comparable provision of services
to all eligible applicants and recipients requiring an alternative
provider. We have revised Sec. 260.34(g) of the final rule to help
ensure that States adopt reasonable definitions of the terms in this
section and to reflect our expectation that this section is implemented
fairly.
Comment: One commenter, noting a potential tension between the
protections provided to religious organizations and the alternative
provider requirements on States, suggested regulatory language that
explicitly prohibits governmental entities from considering the impact
of the alternative service provider requirements when considering
faith-based providers.
Response: Once a State or local government elects the option to
provide services through non-governmental entities, then the Charitable
Choice provisions ensure that ``* * * religious organizations are
eligible, on the same basis as any other private organization * * *''
Implicitly, in that requirement, State or local governments are
prohibited from considerations other than those leading to the
selection of providers that can best achieve the secular purposes of
the service or benefit. ACF believes State and local governments
clearly understand this and that an explicit addition to the rules is
not needed.
Comment: To protect beneficiaries, one commenter offered three
suggestions: (1) That clients be held harmless from work requirements
while the State seeks alternative services; (2) that there be no
penalty for requesting alternative providers; and (3) that a State and
Federal administrative complaint mechanism be created.
Response: The work participation requirements are set forth in
section 407 of the Social Security Act, with implementing regulations
at 45 CFR part 261. Under section 407, there are limited circumstances
under which an individual may be exempted from work requirements. The
commenter's suggestion is not among them. Nevertheless, States have the
flexibility to develop additional exemption criteria, with the
understanding that the State must still meet its required work
participation rate target. Each State may also establish its own
criteria for determining when not to impose a penalty on an
individual--namely, when an individual has ``good cause'' for not
engaging in required work activities.
Secondly, under the TANF Charitable Choice provisions, government
may not compel an individual, through loss of public benefit or
advantage, to profess a religious belief or to observe an inherently
religious practice. Therefore, the State may not penalize an individual
for requesting to receive a service from an alternative provider
because he or she objects to the religious character of the
organization or institution from which he or she receives or would
receive the service.
Finally, while the Charitable Choice provisions do not include any
statutory basis for us to create a Federal appeal process, we are
confident that States conscientiously provide protections to
beneficiaries. For example, States are required to outline in a State
plan how they will require a parent or caretaker to engage in work
activities, the objective criteria for the delivery of benefits, and an
explanation of how the State will provide opportunities for recipients
who have been adversely affected to be heard in an administrative or
appeal process. ACF has heard of few abuses or complaints about the
adequacy of existing procedures.
Comment: One commenter suggested that the final rules clarify that
an individual may not object to services provided by a secular, non-
profit community-based organization and request alternative faith-based
services.
Response: We agree that this individual right is not provided by
the Charitable Choice statute or regulation. The right of a beneficiary
to an alternative provider derives only when the individual has an
objection to the ``religious character of the organization or
institution from which the individual receives, or would receive
assistance * * *'' Since secular organizations, by definition, do not
have a ``religious character'', no right to an alternative is created.
Nonetheless, we encourage states to respect the religious or
nonreligious choices of all beneficiaries.
Comment: Several commenters suggested that the final rule specify
that beneficiaries who object to the religious character of an
organization have the right to a secular provider.
Response: The Charitable Choice statute does not specify that the
alternative provider needs to be a secular organization. We have chosen
not to adopt this suggestion for three reasons. First, the purpose of
the statute is to respect beneficiary choice, and some beneficiaries
may prefer an alternative religious provider to an alternative secular
provider. Second, many faith-based organizations deliver services in a
secular manner. As a result, most beneficiaries will not object to the
religious character of these organizations, and we do not want to
exclude them as potential providers of service. Third, under the
permissive statutory language that we have retained, State and local
governments may offer a secular alternative. We believe States will
implement this requirement in a manner consistent with their obligation
to ensure compliance with the Establishment Clause of the First
Amendment.
Comment: One commenter noted that the proposed rule was unclear on
whether the alternative provider
[[Page 56461]]
requirement applies to the designated, non-profit (under section
501(c)(3) of the tax code) arm of a religious organization.
Response: The statutory language clearly gives the beneficiary the
right to object to the ``religious character of the organization or
institution from which the individual receives, or would receive,
assistance. * * *.'' We believe this gives the client the right to
object, even when the services will be delivered without inherently
religious activities by the non-profit arm of a faith-based group, so
no clarification is necessary for the final rule.
X. Fiscal Accountability
Background
Section 260.34(h) of this rule sets forth the financial
responsibility incurred through the receipt of Federal TANF or State
MOE funds. Religious organizations that contract to provide TANF
services or benefits are subject to the same requirements as other non-
governmental organizations to account, in accordance with generally
accepted auditing and accounting principles, for the use of such funds.
Religious organizations may segregate their TANF accounts from non-
governmental funds for other activities. If religious organizations
choose to segregate their Federal TANF or State MOE funds in this
manner, only the segregated funds are subject to audit by the
government.
Comment: Some commenters would like ACF to require that faith-based
organizations separate the TANF funds they receive from other funds,
and incorporate oversight mechanisms. One of the commenters recommended
that we revise the regulation to conform to the standards adopted by
the Substance Abuse and Mental Health Services Administration (SAMHSA).
Other commenters recommended making the language stronger to stress the
importance of creating separate records. One of the commenters wrote
that faith-based organizations and government officials need guidance
regarding the procedures required to separately fund the activities.
Another commenter asked us to maintain the provision that if a
religious organization establishes a separate account, then only the
TANF funds are subject to audit by the government.
Response: Section 104(h)(2) of PRWORA as amended (42 U.S.C.
604a(h)(2)) gives a religious organization the option of segregating
the Federal funds received into a separate account. Therefore, we do
not think it is appropriate to require separate accounts because this
would be stricter than the law stipulates. By contrast, the Charitable
Choice provision applicable to SAMHSA, at 42 U.S.C 290kk-1(g)(2),
specifically requires that the religious organization program
participant segregate the Federal funds provided under award from non-
Federal funds.
The religious organizations are responsible for deciding whether to
establish separate account(s) to receive and to disburse the funds and
for developing their own means of doing so. Organizations that are able
and willing to separate the funds received from the State into a
separate account will have only those funds subject to audit.
Comment: One commenter asked us to clarify whether only the Federal
TANF funds, as opposed to State MOE funds, are subject to audit when
religious organizations segregate the funds into a separate account.
Response: The limited audit authority applies to Federal TANF and
State MOE funds, whether received directly or indirectly, unless State
law expressly prohibits this flexibility from extending to State MOE
funds. Both Federal TANF and State MOE funds are subject to the TANF
Charitable Choice provisions.
We recognize that the TANF Charitable Choice provision at section
104(h)(2) of PRWORA as amended (42 U.S.C. 604a(h)(2)) refers only to
Federal TANF funds. But, the intent of this provision is to enable the
organization to opt to limit the scope of fiscal audits. Therefore, we
have concluded that extending the option to include State MOE funds is
consistent with the statutory intent. We have clarified this point in
Sec. 260.34(h).
Comment: Some commenters think that the regulation does not
adequately guard against using the funds for religious activities. One
commenter asked us to address the accounting and/or separation
principles which must be followed with respect to the separate funding
of permitted and restricted activities in order to demonstrate that the
organization has not expended any government funds on restricted
activities. Several of the commenters requested that the final rule
require that the religious organization establish a separate corporate
structure (e.g., incorporate under 501(c)(3)) or other type of separate
structure that would distinguish the religious entity from its
government-funded social welfare organization. Another commenter is
concerned that the option for religious organizations to commingle
funds could make it more difficult and expensive for the State to
ensure that public funds are not supporting ``inherently religious
activities.'' This commenter noted that the Community Services Block
Grant program proposed rule does not allow for the commingling of funds
by religious organizations.
Response: Under the TANF Charitable Choice statute, religious
organizations may, but are not required to, establish a separate
account structure, including incorporating or operating the separated
part as a non-profit organization under section 501(c)(3) of the
Internal Revenue Code. Because religious organizations do not have to
incorporate or operate as a non-profit organization, we have deleted
the definition of religious organization--i.e., ``a non-profit
religious organization'' from the final regulation.
The final rule provides that religious organizations receiving
Federal TANF or State MOE funds will be subject to audit, just like any
other non-governmental organization receiving such funds. The State is
responsible for the appropriate use of its Federal TANF and State MOE
funds, so the organization needs to be able to show to the State and
the auditor that it used the funds, whether provided directly or
indirectly, for the purpose intended by the State. Specifically, as
provided in 45 CFR 92.26, TANF grantees and sub-grantees are
responsible for obtaining audits by an independent auditor following
generally accepted government auditing standards, in accordance with
both the Single Audit Act and OMB Circular A-133. These require that
grantees spending more than $300,000 in Federal funds per year must
obtain an annual independent audit, normally conducted by a private
firm. This authority is in 31 U.S.C. section 7502(a)(1)(A) and (c). The
State or local government must determine whether the grantee and sub-
grantees have complied with all laws applicable to expenditures, which
includes a determination as to whether the proscription against using
direct funding for inherently religious practices has been followed.
State officials may want to establish reasonable and prudent
procurement policies, building in real and meaningful safeguards to
prevent the diversion of funds to any ineligible purpose.
Moreover, HHS is authorized to conduct any additional audits or
reviews that are warranted, irrespective of the amount of Federal funds
expended by the grantee annually, in order to ensure compliance with
program requirements including the restriction against direct funding
of inherently religious activities. This authority is in 45 CFR
92.40(e). HHS may determine that such audits or reviews are warranted
based upon any
[[Page 56462]]
information received by the agency that raises an issue concerning the
propriety of expenditures.
As we noted in an earlier response, we do not think it is
appropriate to require a separate corporate or other structure because
this would be stricter than the TANF Charitable Choice statute
stipulates. In contrast to the TANF Charitable Choice provisions, the
Charitable Choice provisions applicable to SAMHSA at 42 U.S.C 290kk-
1(g)(2) and the Community Services Block Grant program at 42 U.S.C.
9920(d)(2) specifically require that the religious organization program
participant segregate the Federal funds it receives into a separate
account.
Comment: One commenter noted that there is no requirement against
using government funds to supplant church funds. Therefore, the final
rule should make clear that ``pervasively sectarian'' organizations
should not receive direct funding.
Response: We disagree with this recommendation. To begin with, it
contradicts the very purpose of the TANF Charitable Choice provisions.
The TANF Charitable Choice provisions provide a level playing field in
the government's procurement of benefits and services that it has
chosen to provide to TANF-eligible families and individuals. To this
end, the Charitable Choice provisions give qualified religious
organizations the right to participate in the provision of these
services. Hence, as we have indicated in Sections III and IV of these
comments, a religious organization may not be excluded from the
procurement process on the basis that it is religious, too religious,
or ``pervasively sectarian.'' In addition, the Supreme Court's
``pervasively sectarian'' doctrine no longer enjoys the support of a
majority of the Court. See Mitchell v. Helms, 530 U.S. 793, 825-829
(2000) (plurality opinion); id. at 857-858 (O'Connor, J., concurring in
judgment, joined by Breyer, J. (requiring proof of ``actual diversion
of public support to religious uses'').
None of the Federal TANF or State MOE funds provided directly to
the organization may be used for inherently religious activities. The
government has purchased a service from the religious organization to
deliver a specific social service benefit(s) to TANF applicants or
recipients.
Comment: One commenter recommended that we define ``non-profit''
organization consistent with the definition provided in the SAMHSA
proposed rule at 67 FR 77350 regarding the Charitable Choice Clause.
Response: We decline to add a definition of ``non-profit''
organization. As we explained, we have deleted the definition of
``religious organization'' that was in the NPRM, which contained a
reference to ``non-profit.''
XI. Effect on State and Local Funds
Background
Section 104(a) of PRWORA as amended (42 U.S.C. 604a(a)) applies to
``a State program funded under part A of title IV of the Social
Security Act'' (TANF) and also to ``any other program established or
modified under title I or title II of this Act that permits contracts
with organizations; or permits certificates, vouchers, or other forms
of disbursement to be provided to beneficiaries as a means of providing
assistance.'' Title I includes all TANF provisions, including the
maintenance-of-effort (MOE) requirement that States continue to expend
a specified level of State or local funds. Claimed expenditures must be
spent on eligible families for activities that achieve a TANF purpose.
(Title II is the Supplemental Security Income program.)
The proposed rule followed the statute in specifying that the
Charitable Choice requirements apply both when a State or local
government uses Federal TANF funds to procure services and benefits
from non-governmental organizations, or to redeem certificates,
vouchers, or other forms of disbursement or when the State claims those
expenditures to meet the MOE requirement. We said that the Charitable
Choice provisions apply whether the State or local funds are commingled
with Federal funds, segregated, or expended in separate State programs.
The proposed rule also clarified that, pursuant to section 104(k)
of PRWORA as amended (42 U.S.C. 604a(k)), nothing in the Charitable
Choice requirements shall be construed to preempt any provision of a
State constitution or State statute that prohibits or restricts the
expenditure of State funds in or by religious organizations.
Comment: A number of commenters opposed the application of
Charitable Choice to the State and local funds claimed to meet the MOE
requirement. Some believed that Charitable Choice should only apply to
the use of Federal TANF dollars. Others believed that the rule covers
commingled funds, but asked that we modify the rule with respect to
both segregated funds and funds expended in separate State programs.
Still others believed the rule should apply to funds expended in the
TANF program (Federal funds, commingled and segregated MOE
expenditures) but that it ought not apply to expenditures in separate
State programs, like other TANF rules.
Response: Because ACF did not regulate on Charitable Choice or
provide guidance earlier, we recognize that many may not have
understood that the statutory provision applies to State and local
funds claimed to meet the State's MOE requirement, just as it applies
to Federal TANF funds. Given the nearly total flexibility provided to
States with respect to separate State programs, we also acknowledge
that the application of the Charitable Choice requirements to these
funds is unusual, because only a few of the TANF rules apply to the
expenditure of State funds in separate State programs.
But, while we recognize the frustration of some of the commenters
with the interpretation in the NPRM and the preference of others to
modify the rule, for the reasons explained in the ``Background'' above,
we believe the better reading of the statute is that Charitable Choice
applies to all State funds claimed to meet the maintenance-of-effort
requirements.
Comment: Several commenters noted that the preemption clause did
not address local laws and asked us to clarify in the final rule that
the Charitable Choice provisions do not preempt any provision of a
State constitution, State statute or local ordinances that prohibits or
restricts the expenditure of State funds in or by religious
organizations.
Response: Section 104(k) (42 U.S.C. 604a(k)) preserves ``a State
constitution or State statute that prohibits or restricts the
expenditure of State funds in or by religious organizations''; it
contains no reference to ``local laws'' or ``ordinances.'' In addition,
the TANF Charitable Choice statute, read as a whole, demonstrates that
Congress was cognizant of the distinction between State and local law.
For example, section 104(d)(1) (42 U.S.C. 604a(d)(1)) provides that a
religious organization participating in a TANF program ``shall retain
its independence from Federal, State, and local governments * * *.'' We
therefore believe that the existing language faithfully implements the
statute.
Comment: Several commenters noted that the proposed rule was
confusing. If Charitable Choice applies to the use of Federal funds and
all State and local expenditures claimed to meet MOE, what does the
preemption provision mean?
Response: We understand the confusion. But, Congress recognized
that some States have enacted laws to
[[Page 56463]]
ensure a more rigorous ``separation of church and state.'' These States
either prohibit or restrict contracts with religious organizations or
more broadly proscribe providing any State funding to them. In enacting
Charitable Choice, Congress explicitly allowed these State prohibitions
or restrictions, as they apply to State funds only, to take precedence
over this Federal provision.
The provision at section 104(k) of PRWORA as amended (42 U.S.C.
604a(k)) which preserves ``a State constitution or State statute that
prohibits or restricts the expenditure of State funds in or by
religious organizations,'' only applies to the State's own funds, but
not to Federal TANF funds. The ``preemption'' provision also does not
apply to State funds that have been commingled with Federal TANF funds.
(Federal requirements only affect the use of Federal TANF funds, unless
the State commingles its money with Federal TANF funds. If a State
commingles its funds, the Federal and State funds become subject to the
same rules.) A number of States may have general or specific provisions
that prohibit or restrict providing direct or indirect State funds to
religious organizations. Such States should use segregated Federal TANF
funds to pay for any benefits and services provided by religious
organizations, to avoid the risk of running afoul of a provision in
their laws that prohibits or restricts the expenditure of State funds
in or by religious organizations.
So, another way of expressing the requirements is that if a State's
constitution or law prohibits or restricts State funds from going to
religious organizations, or proscribes contracts with religious
organizations, the Charitable Choice requirements do not apply to those
State funds. We defer to the State to interpret the scope of its
constitution or law. But, if a State does not have such prohibitions or
restrictions, then Charitable Choice applies to both Federal TANF funds
and State and local expenditures claimed for MOE purposes. This is
faithful to Congress' expressed intention to preserve State
constitutional or statutory restrictions on State funds, while ensuring
that Federal rules apply to both Federal and State MOE funds in the
absence of such State law provisions.
Comment: Several commenters asked that the final rule clarify that
the provision at section 104(k) of PRWORA as amended (42 U.S.C.
604a(k)) which preserves ``a State constitution or State statute that
prohibits or restricts the expenditure of State funds in or by
religious organizations,'' also includes State and local
nondiscrimination hiring provisions.
Response: We do not agree that the provision at section 104(k) of
PRWORA as amended (42 U.S.C. 604a(k)) addresses employment
nondiscrimination provisions. Rather, this provision explicitly covers
provisions of a State constitution or State statute that prohibits or
restricts the expenditure of State funds ``in or by religious
organizations.'' Employment nondiscrimination provisions do not fall
within this category.
XII. Treatment of Intermediate Organizations
Background
Section 260.34(k) of this rule provides that, if a non-governmental
organization (referred to here as an ``intermediate organization''),
acting under a contract or other agreement with the Federal government
or a State or local government, is given the authority under the
contract or agreement to select other non-governmental organizations to
provide services under the program, the intermediate organization must
ensure that there is compliance with the Charitable Choice provisions.
The intermediate organization retains all other rights of a non-
governmental organization under the Charitable Choice provisions.
Comment: One commenter asked for clarification on whether these
rules apply to Tribal governments that participate or contract with the
State as part of a State's TANF program. Related to this question is
the issue of whether these rules apply to a Tribal government or
organization that has the authority under the contract or agreement
with the State to select other organizations to provide services under
the program.
Response: Tribes that operate their own TANF program under section
412 of the Social Security Act are not required to follow the
Charitable Choice rules because the statutory provisions on Charitable
Choice refer only to State and local governments. However, Tribes must
adhere to these rules if they are under a contract or agreement with
the State to operate some aspect of the State's TANF program and the
Tribe has the authority to select other organizations and disburse
funds to provide benefits and services. Under such an arrangement, a
Tribe is functioning like any other intermediate organization and, is,
therefore bound to ensure compliance with the statutory provisions of
Charitable Choice and these implementing regulations.
Comment: Six commenters raised a number of different issues with
respect to our regulatory provision on intermediate organizations. The
first issue is whether or not a State's use of intermediate
organizations to select TANF service providers is unconstitutional. The
second issue is whether or not we should specifically regulate the
requirements that intermediate organizations be held to the same
standards of service, care, nondiscrimination, financial management and
accounting rules as the agency receiving the direct grant. The third
issue is whether or not we should regulate a requirement that
intermediate organizations identify and describe basic information on
each subgrantee. The fourth issue is whether or not religious
organizations should be permitted to function as intermediate
organizations.
Response: We do not agree that the use of an FBO as an intermediate
organization is unconstitutional. Our review did not disclose any
precedents, legal or otherwise, that would prevent a State from
selecting an FBO as an intermediate organization. The purpose of the
provision in Sec. 260.34(k) is not to delegate authority to
organizations to carry out tasks that are traditionally reserved for a
governmental agency. States already have the authority to procure
needed social services through the non-governmental sector. Nor is it
uncommon for States to authorize non-governmental intermediaries to
select TANF service providers by contracting with them to do so. Since
the responsibility to select service providers is often vested in non-
governmental organizations, it is not a duty that traditionally has
been an exclusive function of the government , and intermediate
organizations (whether religious or secular) are in any event obligated
to act as the government itself must act when carrying out their
intermediary functions under this program. We also wish to emphasize
that a State's use of intermediate organizations does not relieve the
State of its traditional responsibility to effectively monitor the
actions of such organizations. The regulations at 45 CFR 92.40 hold a
State accountable for managing the day-to-day operations of grant and
subgrant supported activities to assure compliance with applicable
Federal requirements and performance goals. Moreover, no provision of
this rule relieves a State of its responsibility to ensure that
providers are selected in a manner consistent with the Establishment
Clause.
Regarding the issues related to standards of service, financial
[[Page 56464]]
management, accounting, and reporting on subgrantee activities, an
intermediate organization, like a State grantee, is held to the
requirements enunciated in the Federal regulations at 45 CFR Part 92
(which implements the provisions of OMB Circular A-103) and OMB
Circulars A-87 and A-133 on the Single Audit Act. Given that both the
State and its intermediate organization are subject to these existing
requirements, we see no need to further regulate in this area.
Regulating on nondiscrimination is also unnecessary since intermediate
organizations are covered by the provisions at Sec. 260.34(e) and (f)
of this rule along with the protections offered by other Federal civil
rights laws as listed at 45 CFR 260.35.
On the issue of whether or not we should permit an FBO to serve as
an intermediate organization, we have decided to maintain the position
taken in the NPRM---i.e., to allow a State to select an FBO as an
intermediate organization. We believe that our rules on fiscal
accountability, on the obligations of such intermediate organizations,
and on the prohibition on the use of Federal TANF or State MOE funds
for inherently religious activities are sufficient protections against
the possibility that an FBO will use these funds to advance its
religious beliefs.
This final rule corrects a typographical error in the NPRM. The
lead sentence after the heading ``Treatment of Intermediate
Organizations'' in the preamble to the NPRM incorrectly referred to
paragraph (i); the correct paragraph in the NPRM was (j). This
provision now appears in Sec. 260.34(k) of in the final rule.
XIII.Regulatory Analysis
Paperwork Reduction Act of 1995
No new information collection requirements are imposed by these
regulations, nor are any existing requirements changed as a result of
their promulgation. Therefore, the requirements of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507(d)), regarding reporting and
record keeping, do not apply.
Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. 605(b)) requires the
Federal government to anticipate and reduce the impact of rules and
paperwork requirements on small businesses and other small entities.
Small entities are defined in the Act to include small businesses,
small non-profit organizations, and small governmental entities. This
rule will affect primarily the 50 States, the District of Columbia, and
certain Territories. Therefore, we certify that this rule will not have
a significant impact on small entities.
Comment: One commenter stated that the rule should be considered
``major'' because it will have a significantly adverse impact on
employment by allowing for discrimination based on religion.
Response: We disagree. For years, section 702(a) of the Civil
Rights Act of 1964 as amended has relieved religious organization from
compliance with Title VII employment nondiscrimination requirements.
Therefore, we believe that there will not be any significant adverse
impact on employment.
Regulatory Impact Analysis
Executive Order 12866 requires that regulations be reviewed to
ensure that they are consistent with the priorities and principles set
forth in the Executive Order. The Department has determined that this
rule is consistent with these priorities and principles. This rule is
considered a ``significant regulatory action'' under the Executive
Order, and therefore has been reviewed by the Office of Management and
Budget. This rulemaking implements statutory authority and reflects our
response to comments received on the NPRM that we issued on December
17, 2002 in 67 FR 77362 (2002).
Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that a covered agency prepare a budgetary impact statement before
promulgating a rule that includes any Federal mandate that may result
in the expenditure by State, local, and Tribal governments, in the
aggregate, or by the private sector, of $100 million or more in any one
year.
The Department has determined that this rule would not impose a
mandate that will result in the expenditure by State, local, and Tribal
governments, in the aggregate, or by the private sector, of more than
$100 million in any one year.
Comment: Two commenters mentioned that this rule would result in
expenditures in excess of the $100 million threshold.
Response: We disagree. Conditions attached to federal grant
programs are not generally considered ``mandates'' under The Unfunded
Mandates Reform Act (UMRA) of 1995. Nevertheless, with a large program
like the TANF program, a new grant condition or reduction in federal
financial assistance could be considered a mandate if States lack the
flexibility to offset the new costs or the loss of Federal funding with
reductions or other design alternatives elsewhere in the program. For
example, under the Charitable Choice provisions, when an otherwise
eligible TANF applicant or recipient objects to the religious character
of a TANF service provider, the State or local agency must refer the
individual to an alternative provider of services. While this could be
viewed as an additional expenditure for the State, we have concluded
that this does not trigger the requirement under section 202 of the
UMRA of 1995. In addition to the fixed amount of their own money that
States must spend toward their maintenance-of-effort requirements,
States also receive annual Federal funding. Furthermore, the welfare
reform law gave States broad flexibility to provide a variety of
benefits and services for their clientele. In determining which
services to provide, States know that they have to prioritize the needs
of their clientele by balancing funding options and strategies that
best address these needs with budgetary considerations. For example,
some providers are able to offer more than one service, including the
service the individual is entitled to receive from an alternative
provider.
Congressional Review
This regulation is not a major rule as defined in 5 U.S.C. chapter
8.
Assessment of Federal Regulation and Policies on Families
We certify that we have made an assessment of this rule's impact on
the well-being of families, as required under section 654 of The
Treasury and General Government Appropriations Act of 1999. The purpose
of the TANF program is to strengthen the economic and social stability
of families, in part by supporting the formation and maintenance of
two-parent families and reducing out-of-wedlock childbearing. This rule
expands the pool of providers that States may contract with in order to
deliver effective services that support the purpose of the TANF
program.
Executive Order 13132
Executive Order 13132, Federalism, requires that Federal agencies
consult with State and local government officials in the development of
regulatory policies with Federalism implications. In the NPRM, we
specifically solicited comments from State and local government
officials.
Comment: Two commenters specifically mentioned that we should have
consulted with State and local officials before the issuance of a final
rule.
Response: We believe that our solicitation in the NPRM satisfied
the
[[Page 56465]]
consultation requirement of Executive Order 13132. ACF provided a
comment period during which time, the agency heard from many State
welfare agencies and social service departments, and the rules have
been drafted in a manner which provides States flexibility.
Accordingly, we certify that the requirements of Executive Order 13132
have been satisfied.
List of Subjects in 45 CFR Part 260
Grant programs-social programs, Loan programs-social programs,
Public assistance programs.
Dated: September 22, 2003.
Wade F. Horn,
Assistant Secretary for Children and Families.
Tommy G. Thompson,
Secretary of Health and Human Services.
XIV. Final Rule
0
For the reasons discussed above, title 45 CFR chapter II is amended as
follows:
PART 260--[AMENDED]
0
1.The authority citation for 45 CFR part 260 continues to read as
follows:
Authority: 42 U.S.C. 601, 601 note, 603, 604, 606, 607, 608,
609, 610, 611, 619, and 1308.
0
2. A new Sec. 260.34 is added to read as follows:
Sec. 260.34 When do the Charitable Choice provisions of TANF apply?
(a) These Charitable Choice provisions apply whenever a State or
local government uses Federal TANF funds or expends State and local
funds used to meet maintenance-of-effort (MOE) requirements of the TANF
program to directly procure services and benefits from non-governmental
organizations, or provides TANF beneficiaries with certificates,
vouchers, or other forms of indirect disbursement redeemable from such
organizations. For purposes of this section:
(1) Direct funding or funds provided directly means that the
government or an intermediate organization with the same duties as a
governmental entity under this part selects the provider and purchases
the needed services straight from the provider (e.g., via a contract or
cooperative agreement).
(2) Indirect funding or funds provided indirectly means placing the
choice of service provider in the hands of the beneficiary, and then
paying for the cost of that service through a voucher, certificate, or
other similar means of payment.
(b)(1) Religious organizations are eligible, on the same basis as
any other organization, to participate in TANF as long as their Federal
TANF or State MOE funded services are provided consistent with the
Establishment Clause and the Free Exercise Clause of the First
Amendment to the United States Constitution.
(2) Neither the Federal government nor a State or local government
in its use of Federal TANF or State MOE funds shall, in the selection
of service providers, discriminate for or against an organization that
applies to provide, or provides TANF services or benefits on the basis
of the organization's religious character or affiliation.
(c) No Federal TANF or State MOE funds provided directly to
participating organizations may be expended for inherently religious
activities, such as worship, religious instruction, or proselytization.
If an organization conducts such activities, it must offer them
separately, in time or location, from the programs or services for
which it receives direct Federal TANF or State MOE funds under this
part, and participation must be voluntary for the beneficiaries of
those programs or services.
(d) A religious organization that participates in the TANF program
will retain its independence from Federal, State, and local governments
and may continue to carry out its mission, including the definition,
practice and expression of its religious beliefs, provided that it does
not expend Federal TANF or State MOE funds that it receives directly to
support any inherently religious activities, such as worship, religious
instruction, or proselytization. Among other things, faith-based
organizations may use space in their facilities to provide TANF-funded
services without removing religious art, icons, scriptures, or other
symbols. In addition, a Federal TANF or State MOE funded religious
organization retains the authority over its internal governance, and it
may retain religious terms in its organization's name, select its board
members on a religious basis, and include religious references in its
organization's mission statements and other governing documents.
(e) The participation of a religious organization in, or its
receipt of funds from, a TANF program does not affect that
organization's exemption provided under 42 U.S.C. 2000e-1 regarding
employment practices.
(f) A religious organization that receives Federal TANF or State
MOE funds shall not, in providing program services or benefits,
discriminate against a TANF applicant or recipient on the basis of
religion, a religious belief, a refusal to hold a religious belief, or
a refusal to actively participate in a religious practice.
(g)(1) If an otherwise eligible TANF applicant or recipient objects
to the religious character of a TANF service provider, the recipient is
entitled to receive services from an alternative provider to which the
individual has no religious objection. In such cases, the State or
local agency must refer the individual to an alternative provider of
services within a reasonable period of time, as defined by the State or
local agency. That alternative provider must be reasonably accessible
and have the capacity to provide comparable services to the individual.
Such services shall have a value that is not less than the value of the
services that the individual would have received from the program
participant to which the individual had such objection, as defined by
the State or local agency.
(2) The alternative provider need not be a secular organization. It
must simply be a provider to which the recipient has no religious
objection. States may adopt reasonable definitions of the terms
``reasonably accessible,'' ``a reasonable period of time,''
``comparable,'' ``capacity,'' and `` value that is not less than.'' We
expect States to apply these terms in a fair and consistent manner.
(3) The appropriate State or local governments that administer
Federal TANF or State MOE funded programs shall ensure that notice of
their right to alternative services is provided to applicants or
recipients. The notice must clearly articulate the recipient's right to
a referral and to services that reasonably meet the timeliness,
capacity, accessibility, and equivalency requirements discussed above.
(h) Religious organizations that receive Federal TANF and State MOE
funds are subject to the same regulations as other non-governmental
organizations to account, in accordance with generally accepted
auditing/accounting principles, for the use of such funds. Religious
organizations may keep Federal TANF and State MOE funds they receive
for services segregated in a separate account from non-governmental
funds. If religious organizations choose to segregate their funds in
this manner, only the Federal TANF and State MOE funds are subject to
audit by the government under the program.
(i) This section applies whenever a State or local organization
uses Federal TANF or State MOE funds to procure services and benefits
from non-governmental organizations, or redeems certificates, vouchers,
or other forms of disbursement from them whether with Federal funds, or
State and local funds
[[Page 56466]]
claimed to meet the MOE requirements of section 409(a)(7) of the Social
Security Act. Subject to the requirements of paragraph (j), when State
or local funds are used to meet the TANF MOE requirements, the
provisions apply irrespective of whether the State or local funds are
commingled with Federal funds, segregated, or expended in separate
State programs.
(j) Preemption. Nothing in this section shall be construed to
preempt any provision of a State constitution, or State statute that
prohibits or restricts the expenditure of segregated or separate State
funds in or by religious organizations.
(k) If a non-governmental intermediate organization, acting under a
contract or other agreement with a State or local government, is given
the authority under the contract or agreement to select non-
governmental organizations to provide Federal TANF or MOE funded
services, the intermediate organization must ensure that there is
compliance with the Charitable Choice statutory provisions and these
regulations. The intermediate organization retains all other rights of
a non-governmental organization under the Charitable Choice statute and
regulations.
(l) Any party which seeks to enforce its right under this section
may assert a civil action for injunctive relief exclusively in an
appropriate State court against the entity or agency that allegedly
commits such violation.
[FR Doc. 03-24291 Filed 9-25-03; 12:15 pm]
BILLING CODE 4184-01-P